The gold price was consolidating, not licking its wounds at all. Yes, it did
struggle to break up, but this price isn't interested in going down, it seems.
In Euros it is actually rising, from the low just below Euros319 to the present
level of Euros 327.05. Looking around it seems as if the Funds exited stage
left leaving the net long position at just under 200 tonnes. Why you may well
ask did they wait for the quiet holidays to start the games? Certainly the
Technical picture would stand more chance of dominating when only the professionals,
not on holiday, were around. Even in the currency markets, where the $ was
strong, putting the Euro well onto the back foot, taking it down to 1.299 at
one point, the action was lively. But now the holidays are rapidly becoming
a distant memory as the pace of life and the markets get back to business.

Take a look back to this time last year. The gold price was hitting a new
peak at around $429, before it started to wilt and kept on so until September,
before advancing to new heights at the end of last year. With the possibility
of that happening and the market needing a breather, it looked a good move.
But this year has a completely different flavour now than last year already.
The price, for such a huge tonnage of gold to be dumped on it, did well, falling
in $'s to the $420 level from the peak of $456. And it is still holding up
well.

On the physical side, we note that the E.T.F. streetTRACKS bought an additional
47 tonnes of gold since the beginning of this year, setting it off to a good
start. We are keeping our eyes on the gold price in Euros carefully, but expect
the $ price to continue to move, riveted to the Euro, except for this developing
independence suddenly appearing [?]. Time will tell if this is structural or
momentary.

Cross around to the other side of the globe and we find our Indian friends
in the Gold market happy with these prices, but not so happy with the policy
of keeping the Rupee alongside the $. Still this has to be, as the $ rules
international trade prices for all goods. With their wedding season under way
[14,000 weddings to start the season] and the harvests more than adequate,
there are a huge number of dowries to pay for.

The U.S. Dollar ($) - The darkening clouds of instability & inflation

The rally is still here, with the Euro sitting just on the $1.30 level, having
dipped below it briefly to the high @1.29 level. Now talk of a more aggressive
rising of rates is the 'feel' of the moment. Somehow this doesn't ring true
to us. Whilst there is plenty of time before the Fed meeting in February,
it is possible that the published inflation levels will be lower than forecast.
A rising concern at the Fed about the nation's imbalances: the federal deficit,
which hit $413 billion in 2004; a low and declining national savings rate;
evidence of speculative behavior among investors and consumers; and the country's
enormous trade and financial deficit with the rest of the world.

There is a need for rates to rise if the Fed is to have a tool to cope with
inflation, even if it is a blunt one at best. But it is clear from our understanding
of Fed official's statements that the raising of rates will be on a 'catch-up'
basis to inflationand will not even attempt to lead the way. This
is a dramatic turn of events, because growth is too fragile to be able to have
the Fed raise rates to the level at which they can dominate inflation, is the
reason why they must follow. This is putting pressure on the Fed and putting
distance between themselves and the Bush Administration. At present levels
the Fed Funds rate is emasculated.

Some time ago we pointed to the poor state of the gold distribution system in
China holding back demand for gold there. The evidence that this is so is mounting.
This has now been confirmed by the rapid speed that offerings of gold to the
public are being taken up almost instantly. Evidence of the demand for
gold was particularly clear when the Caishikou department store sold all its
gold bars in just a matter of hours last month. When a second set of gold bars
was released, the top gold retailer in Beijing asked people to register by
phone and nearly 3,000 people did. The Chinese government is never in a hurry
to do anything, but it has made its policy clear through Zhou Xiaochuan, governor
of the People's Bank of China, the country's central bank, who said previously
that China will encourage more banks to provide individual gold trading services
to boost the metal's role as an investment vehicle. China deregulated its gold
market in late 2002, when the Shanghai Gold Exchange began operations for institutional
investors. Last year 235.35 tonnes of gold were traded on the exchange and
the figure had already reached 170.04 tonnes of gold in the first half of 2004
alone.

The Bank of China, one of the four biggest lenders in the country, received
approval to conduct individual gold trading on December 17. It has now announced
it is expanding its programme to the whole of China, rather than just Shanghai.The
Agricultural Bank of China, another of the 'big four' has become the second
mainland lender to offer trading in gold certificates to its retail customers.
The Beijing-based lender said yesterday that it received permission from the
China Banking Regulatory Commission to offer financial instruments whose returns
are based on gold prices. Gold trading services will be launched nationwide
before the Spring Festival next month, Yang Kun, a bank vice president, said
in a statement. Individuals will be able to trade gold bullion through special
accounts without physically acquiring the precious metal - transactions that
are referred to as "paper gold." In addition, the bank also has plans to offer
trading in actual bullion.

We expect that the government's permission will be extended to all the four
governments banks soon, as they see the business is soundly based. It is the
government's intention to have gold fully liberalised and freely traded within
its borders. The Chinese government is slow in moving forward. It would rather
that a sound path be walked before taking any risks, but the pace at which
it is giving permission for national gold trading encourages us to believe
demand will grow far quicker from now on than expected! The introduction of
gold sales is part of a larger effort to expand investment options. China's
citizens set aside 1.59 trillion Yuan (US$191.5 billion) in savings by the
end of last year. The potential demand is so large, when one realises that
gold is a popular means of savings in a nation where the banking system is
relatively simple still and there are few alternatives sound avenues of investment,
for a nation that still loves to save, that demand could go into 4 figures
of tonnes of gold and still sound conservative. The demand for gold from
China is a matter of the number of outlets available. It is not dependent on
a gradual growth of demand. The demand is already there, it just needs
to be tapped!

South Africa - S.A. Rand$1: R5.9500

The U.S.$ rally weakened the Rand to over R6.00: $1. It is still holding
this level, but as we said last week, this could prove short term. The length
of the rally in the U.S. $ will dictate the time the Rand will stay above
R6.00: $1.

We have been expecting an interest rate cut in South Africa. It has become
clear that the Reserve Bank, still introverted, are now unlikely to lower
rates, because the country is enjoying a structural boom at present. The
fear, that if rates are cut, it will inspire over-spending and excessive
stimulation is now being borne out by the new 'financially' empowered black
middle classes spending every penny they get. The growth of this sector is
strongly underway and will continue for the medium term at least. We continue
to believe that the present prudence of the South African Reserve Bank is
misplaced, as it ignores the long-term ramifications of a suffering export
side to this very globally related economy.

[The South African Rand is the price paid to the Gold Mines. With South Africa
producing 11% of the world's new gold, and some leading Mines operating there,
the balance of future gold supplies is directly affected by the strength or
weakness of the Rand, so the Gold Price in Rands is a key one to the gold market.]

Last week the gold price, per ounce was R2,555.86, today it is R2,5430.0

Canada / Australia: - Gold Producers Currencies.

Canada and Australia are two of the leading gold producing countries in
the world. As important, they are home to a very large number of gold shares
and gold investors. We will be tracking the $ and relating the gold price
to those countries as well in the FULL Version.

Japan: - Japanese Yen: - Yen 102.78: U.S.$1

Certainly there is a tremendous fundamental strength in the Yen, not from
the Japanese economy, but from the weakening $. They key to this direction
is whether the Bank of Japan will intervene to prevent such strengthening as
they did last year. We believe they will, as they have to protect the value
of their reserves as well as the trade advantages arising from a lowered Yen
$ value.

The future for Silver in 2005 is still favouring a similar market to the one
it saw in 2004.

Silver as a monetary metal has been discussed of late with Mexican provinces
pushing for its re-instatement in their monetary system. We do not believe
that it will have a global role in the monetary system until some time; well
after gold has made a return to a favored position in the monetary system.

Until then it will continue to show far greater volatility than gold and provide
an excellent trading vehicle. Closing our 'shorts' and opening our 'long' positions,
is proving successful of late. We hope you made good profits!

Platinum $8.75 [Euros 671]

The announcement was made this week of the discovery of Platinum 'reef' formation
at Thunder Bay in Canada, the site of the only Platinum mine in Canada. This
formation is similar to the one found in South Africa in the Rustenburg area.
It certainly expands the supply horizons for the metal. Eventually after the
5+ years it takes to develop a mine, it greatly add to the supplies available
to the market. Whilst the Chinese jewellery industry favours this metal, the
present price is closer to it trading range top than to its bottom.

With the supply moving gently into surplus this year the price is expected
to remain high, despite the forecasts of some analysts seeing it down to the
low $700. Others see it rising to well over $900. We see the formation in the
chart as favouring the latter opinion.

For Subscribers to "Global Watch - The Gold Forecaster"

Gold/Silver Equities? - Which specific equities do you wish to be reviewed?
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Policy Statement.

In "Global Watch - The Gold Forecaster", we will present the global picture,
as it relates to gold and its price whilst synthesising these factors to forecast
the gold price.

The gold price is an amalgam of diverse and changing influences, from Currencies
to Jewellery, from Investors to Speculators. From Asia, to India, to Australia,
to Canada, to South Africa, to the U.S.A. and to Asia, the gold price is of
interest to all. It cannot be seen in isolation as a metal, but must be understood
as a Global Thermometer measuring monetary, political, economic, stability as
well as the raw demand / supply features of the metal itself. These factors
do not merely add up to the price but interact in sometimes, strange ways,
to produce the gold price. For example, rising prices often lead consequently
to rising demand, as the appetite for the metal grows. Its price may rise in
one currency and fall in another, at the same time. Overall, it reacts sensitively
to the overall level of global stability, which, in turn, gives us the gold
price.

It is our task in this letter to track these different features, giving you
both the Technical Analysis and the fundamental features impacting on the gold
price each week. It is our goal to help you to understand and profit from this
market, wherever you are on this globe, in a professional manner. We welcome
any input or observations you may have, which contribute to the enhancement
of this service.

"Global Watch: The Gold Forecaster" covers the global gold market.
It specializes in Central Bank Sales and details, the Indian Bullion market
[supported by a leading Indian Bullion professional], the South African markets
[+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $,
Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the
influential gold price factors across the globe, so as to truly understand
the global reasons behind the gold price.FIND OUT MORE

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